California Life Insurance Attorney: Allianz Life

ATTORNEY NEWSLETTER

Allianz Life Insurance reports record profits in 2015

The Background

The years since the Great Recession have been hard for a lot of people. Stagnant wages, lost jobs, and loss of benefits and insurance. People have had to cut unnecessary expenses out of their budgets and focus on essentials. Thus, it may be somewhat surprising to the average consumer that Allianz, the largest seller of fixed-indexed annuities, has had banner years in both 2014 and 2015, with record profits of about $1 billion last year. The company attributes it to business management, as well as the growing market for their indexed annuity products. So what exactly is it that Allianz Life insurance is selling that has allowed them to bring in that amount of money?

What is an Indexed Annuity?

Indexed Annuities are a fairly recent invention, supposedly designed to allow annuities to generate higher returns for policy holders. Rather than the very modest returns of traditional annuities, which are mostly backed by solid but low-interest treasury bonds, indexed annuities base their returns on stock market indices like the S&P 500, hence their name. However, contrary to expectation, indexed annuities frequently underperform traditional annuities, and although neither indexed nor traditional annuities are without flaws, indexed annuities have a number of serious and unique problems.

What’s wrong with indexed annuities?

Indexed annuities essentially serve as a way for insurance and annuity companies to use more of your money as they see fit. While bonds are stable investments for clients, they don’t produce much money for the company. Indexed annuity contracts allow the company to skim off any earnings above a threshold, and, if the market is bad, to pay significantly lower rates to policyholders than traditional annuities provide.

Why are indexed annuities bought?

Many brokers don’t fully understand the ins and outs of the byzantine indexed annuity policies, and consequently they can’t articulate to their clients exactly what it is they’ll be paying for. But brokers get higher commissions for indexed annuities, and have an incentive to sell them, even when they aren’t sure whether they really represent the best option for their client’s individual situation.

Contact us

If you’re purchased an annuity, or are thinking of doing so, contact the Evans Law Firm. We handle annuity, insurance, and investment fraud cases, as well as financial elder abuse and qui tam/whistleblower law. We can be reached at (415) 441-8669, or by email at info@evanslaw.com.

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